Tax changes could lead to doctor shortages
Proposed rules also will hit farmers, professionals, says Dr. Charles Shaver.
Last month, Finance Minister Bill Morneau proposed changes to taxes on incorporated small businesses and professionals. It would affect 300,000 corporations. The effective tax rate on retirement savings would be 73 per cent and on inheritance 93 per cent. It would affect the quarter of farmers that were incorporated and could cost an individual farmer up to $240,000.
A 700 per cent tax hike on retired business owners would cut their retirement income by 33 per cent. It would, according to Jim Warren, “kill much of the entrepreneurial spirit in Canada and thousands of jobs created by small businesses.” Postmedia columnist Lorne Gunter warned that Canadian farmers, ranchers, and small businessmen would now have great difficulty willing their businesses to their children.
It would also affect professional groups such as dentists, lawyers, physicians, accountants, engineers and architects. Consider several examples:
About 64 per cent of Canadian dentists are incorporated (77 per cent in Saskatchewan). Many charge reduced fees to those on social assistance, refugees, First Nations persons, children. If various government agencies refused to increase payments to compensate for these tax changes, how many dentists would opt out of servicing these groups?
Similarly, if incorporated lawyers provided service at a discount to Legal Aid Saskatchewan, would they still continue to do so?
Some three-quarters of Saskatchewan and Alberta MDs are incorporated. Physicians are a unique group, as they cannot unilaterally raise their own fees. Most Canadian physicians lack the fringe benefits of unionized employees (and politicians) and many pay huge, rising overhead costs. Now they may well be deprived of the financial benefits of incorporation. In provinces such as Ontario, this was given in lieu of a fee increase some 15 years ago.
From 2005-2009, the Canadian Medical Association unsuccessfully lobbied Ottawa to permit fee-for-service MDs to have group pensions. This is permitted in the U.K. The Canadian government refused, as it regarded physicians to be self-employed independent contractors.
Andre Picard recently wrote, “If (governments) adopt measures that make incorporation unattractive and impossible to accumulate retirement savings, then they need to provide an alternative, such as salaries and pensions.”
Physicians are now in limbo. Many face losing their retirement savings, money earmarked for their children’s education or for parental leave. Some older MDs may retire prematurely. Middleaged ones may stay, but will be reluctant to take on financial risks such as opening new clinics, signing leases, purchasing new equipment and hiring nurses and clerical staff.
Many younger, mobile, frustrated physicians — often with student debts of six figures — may relocate south of the border, where a shortfall of up to 88,000 doctors by 2025 is predicted.
Those who stay in Canada may demand the option of a salary. What should it be? Consider that a federal judge earns $308,000, a medical officer of health about $290,000, and the chief of staff of the Ottawa Hospital $546,000 (plus benefits). This would be further increased for specialists, seniority and would cover a 37.5-hour work week, with extra pay for overtime, nights and weekends.
Each province should buy up existing private offices and cover overhead and full malpractice insurance. The benefit package should include sick leave, long-term disability, maternity and paternity leave, study leave, vacations, a drug, dental and supplemental medical plan and an indexed, definedbenefit pension. Could any province really afford this?
Provincial ministries of health will likely urge Morneau to be more receptive to all of these criticisms in view of the unintended consequences, including the massive expenditures required to retain existing physicians if they demanded a salary plus benefits. Otherwise, there will be major doctor shortages in Saskatchewan and most provinces, with increased wait times for the public.